Evaluating the Financial Health of Wal-Mart Stores, Inc

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Evaluating the Financial Health of Wal-Mart Stores, Inc. Wal-Mart Stores, Inc. is a discount variety business that began small and has grown into a worldwide multibillion dollar industry within the forty eight years of operation. Providing a brief history, analyzing the financial statements, performing an industrial comparison and trend analysis, this paper will evaluate the financial health of this corporation. (Walmart Corporate, 2010).
Wal-Mart was established in 1962 by Sam Walton, a 1940 University of Missouri economics major. The first store was opened in Rogers, Arkansas offering a variety of merchandise for consumers. Mr. Walton’s strategy of opening locations in small towns and offering consumers a wide variety of
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The operating profits increased, with a slight drop in 2009, with operating profit margins of 5.02%, 4.86%, and 5.13% for 2008, 2009, and 2010. Wal-Mart also had increased net profits from $12,731 in 2008 to $13,400 in 2009 and $14,335 in 2010. The net profit margins are 3.41% for 2008, 3.34% for 2009 and 3.54% for 2010, which signifies the company improved on turning sales into profits. (Walmart Corporate, 2010).
Wal-Mart has a current ratio of 0.87 times, quick ratio of 0.27 times and a cash flow liquidity of 0.61 times, all for 2010. Their net trade cycle has improved from 11 days to 7 days. This shows that management has made improvements in accounts receivables, inventory, and accounts payable. (Walmart Corporate, 2010).
The total asset turnover for Wal-Mart shows a slight decrease of 0.08 times from 2009 to 2010. This signifies that management needs to improve on generating sales from investments. There were slight decreases in accounts receivables turnover, payables turnover, and fixed asset turnover. These decreases show that management needs to improve conditions with collection and credit policies, paying suppliers, generating sales in fixed assets. The inventory turnover improved from 8.81 times in 2009 to 9.09 times in 2010, which demonstrates that inventory is managed better. (Walmart Corporate, 2010).
The debt ratio has decreased from 58.96% in 2009 to 57.28%
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